Federated Farmers: Fonterra must lift its game

Federated Farmers says Fonterra needs to do a much better job of talking to the public about the slump in dairy prices.

The co-operative has slashed its forecast payments to farmers and extended the payment time for many of its suppliers from 30 days to 90 days.

Federated Farmers dairy industry group chairman Andrew Hoggard told the Paul Henry programme this morning "Communication has been a really weak point for Fonterra for quite a while now."

Mr Hoggard says he told Fonterra they need to improve their communication about the decision to extend the payment times to suppliers.

"They've told me around the supply of things, the terms and conditions, what their view on it is. I've said 'well, why the hell are you not getting out there and telling the rest of New Zealand?'

"They seem really afraid of talking to the public. They need to get on with it and do it a hell of a lot better."

Mr Hoggard says he has told Fonterra that extending payment times and cutting prices to suppliers is "not a good look."

"They said their view was they were doing this to the big suppliers, not the likes of Bob's Plumbing in Hawera, or Dave's Cleaning, or regional businesses, but the likes of Tetrapak and the multinationals they deal with. This is the standard."

Paul Henry asked Mr Hoggard if he believed them?

"I have got no evidence to tell whether they are lying or not. I don't know. They need to come out and state this. If there is proof otherwise we need to see that."

Newshub has been told by suppliers that they won't be paid for ninety days and must cut their prices by ten percent.

Mr Hoggard responded "That is unacceptable. If that is the case no farmer wants to hear about other small businesses being forced to wait 90 days. That is unacceptable. It puts at risk all the good news Fonterra tries to do through Milk In Schools and all this other stuff they are investing in, being a good corporate citizen. It is just money wasted if they do silly things like that."

Paul Henry asked him if he thought Fonterra was a good corporate citizen?

"They try bloody hard. On balance I'd say they do more good than harm. They just need to communicate better."

"Most people are tired of waking up every second Wednesday and hearing about a drop. There is nothing much we can do about it. We just get on with farming."

He says that Fonterra does need to improve the value add side of its business, but a rise in dairy commodity prices is also needed.

"It is unsustainably low."

Today was the first auction since Fonterra cut its forecast milk price to farmers to $3.90 per kilogram of milk solids.

That is well below the estimated breakeven point of $5.25.

Mr Hoggard says "There is quite a bit of work going into mental wellbeing, but also support, working with DairyNZ and others to provide options for farmers and guidance for them."

DairyNZ says the industry has been working for months on a plan to help struggling farmers. It and Federated Farmers have been working with other groups like the Dairy Womens' Network and Rural Support Trusts to come up with ways to help farmers.

DairyNZ Chief Executive Tim Mackle says the reduction in the forecast payout equates to a collective income drop for farmers of $460 million, or $37,000 per farm.

Dairy NZ says it has been holding a series of workshops for famers as part of an education campaign called Tactics.

The workshops are focused on offering practical advice on issues like budgeting, cost cutting and business strategy.

They offer advice on issues like pasture management and reducing reliance on supplementary.

Farmers are also being offered tips on ways to reduce their reliance on supplementary feed.

DairyNZ says there will also be a series of workshops offering advice on mental health and the ways farmers can recognise stress.

Total dairy debt stands at around $38 billion.

But ten percent of the famers hold about 30 percent of the debt. That is around $10 million for each of those farmers.

Dr Mackle says "that doesn't mean all those farms are at risk."

He says farmers' ability to survive depends on the size of their debt and their costs. DairyNZ is particularly concerned about sharemilkers.

"Sharemilkers are one of the very vulnerable groups and so we are already currently running joint workshops with Federated Farmers to help them look at their options."

Twenty percent of the highest indebted farms have 45 to 50 percent of the total debt.

"But again these bald figures don't necessarily spell doom and gloom for all."

Dairy NZ would like to see another cut to the OCR. It says many farmers are also looking at what income they can bring in from off-farm or through diversification.